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Report: Alternative Source Proteins, an attractive market for investors

Why protein substitutes became popular lately? Global consumers, nowadays, have an unprecedented concern about human health and environmental sustainability. This change in eating habits led to the emergence of movements like vegetarianism, veganism, and flexitarianism. Therefore, alternative source proteins became more appealing for customers, and also to entrepreneurs as it is an attractive market.

Excluding meat and dairy from the meal plan not only contributes to animal welfare. It also has several advantages for the health and environment. According to researchers, the consumption of red meat can be linked to digestive issues and heart illness. Due to these facts, the number of consumers eating plant-based is steadily growing. There are several companies already reacting to the change in the demand, offering different types of alternative proteins to the consumers, such as Nestlé and Sensient Natural Ingredients. Nevertheless, there are still countless attractive business opportunities for entrepreneurs in the expanding market.

How to substitute protein?

Meat: Using seitan (wheat gluten), mushrooms, rice, or soy-based products, such as tofu or tempeh, are popular meat substitutes. These products can replicate the taste, and also the texture of the meat.

Dairy: To substitute dairy, consumers can choose from a wide range of drinks made of rice, soya, almond, or coconut oil. Changing to these products facilitate leaving the milk-based product out from the diet permanently.

Eggs: Eliminating eggs from daily life does not mean stopping to bake. To replace eggs, it is possible to use tofu, tapioca starch, or fruits like mashed banana or applesauce.

Importance of plant-based alternatives

The segment of plant-based alternatives is expected to grow significantly in Europe and North America as well, which means an attractive opportunity for companies. Chilled meat substitute will remain the largest segment in value from the meat substitute categories, especially the subsegment of soy-based ready meals is going to expand.

The average prices of the segments slightly increased across the categories in the past, but it is forecasted to stabilize as the industry matures.

Key Drivers of Alternative Source Proteins

1. Price

Several customers choose to reduce meat consumption in order to save money, as the price of red meat is growing. The prices of alternative source proteins are also in the upper range; however, it is expected to decrease as the industry matures. In addition, the prices of the substitutes are still lower than red meat, and it is one of the main reasons for excluding meat from the diet.

2. Environment

Food production accounts for approximately 26% of the global greenhouse gas emissions, and its primary sources are livestock, fisheries, crop production, land use, and supply chains. Therefore, by using low-carbon alternatives, customers can contribute to reducing emissions of food production, which makes alternative protein sources more attractive.

3. Growing population and urbanization

The continuously growing population presents challenges for sustainable development. As the world continues to urbanize, the successful management of urban growth is highly important for lower-middle income countries. These nations will have to provide proper nutrition for the growing population. Producing new types of feed, such as plant-based food, a protein, can be the solution for their concern.

4. Alternative food price per Kg in Europe

The prices of meat alternatives differ between countries, while it is the highest on average in Italy, prices are lower in England and Germany. The retail landscape and consumer habits drive the variance in price mainly. Therefore, customers pay less in countries where the behavior is price-driven.

Who are the key players, and which were the best deals of this attractive market? If you want to know the answers to these questions and more, download our report.  

Find out which other attractive market can be exciting for investors!

Download the full report “Alternative Source Proteins”

To find a complete and graphic view of the milestones of this trend and its global impact.

We will keep you informed of the latest news

The automotive industry

The ONEtoONE team in Mexico has prepared a report on the automotive industry in which they explain the main characteristics of the sector, which is currently an exciting industry for M&A operations.


The automotive sector is one of many that are being transformed by the technological revolution, just like the aeronautic industry. Due to it, the process by which cars have been manufactured is starting to incorporate new technological advancements.

This situation has started a race between companies in the sector trying to consolidate their position thanks to the incorporation of new technological capabilities. As a consequence, potential opportunities are appearing for M&A operations.


Automotive Industry Outlook

Technological developments and the focus on sustainable mobility have revolutionized the automotive sector towards electric energy and autonomous vehicle technology. This implies a change in most areas regarding the sector, such as vehicle manufacturing, auto parts, software, marketing, rental, and maintenance.

News Coverage

Some of the most relevant news regarding the automotive sector are the following:

  • JAC will export from México to Latin America -The Economist 14/10/2018.
  • The automotive industry was the sector that was ‘saved’ in NAFTA: Coparmex -Forbes 28/08/2018.
  • The cumulative sales of electric vehicles have reached 4 million- Bloomberg NEF 30/08/2018.

Download the full report “The automotive industry”

To find a complete and graphic view of the milestones of this trend and its global impact.

We will keep you informed of the latest news

industria aeronautica

The aeronautic industry in 2019

How much is an aeronautics company worth? Today, a lot. During this present year, we can see the aeronautic industry valuations reaching historical figures by looking into the numbers that corporate transactions show. This trend is expected to keep on going for the next few years in terms of M&A transactions within the sector.

According to our last report created by the ONEtoONE team, “The aeronautic industry in 2019”, the participation of certain countries plus a positive economic industry development, has made this sector attractive for M&A activity.

¿Which are the principal geopolitical players?

United States:

The aerospace industry in the USA is the principal character (Boeing), in what refers to innovation as well as the length of their product line, with a 47,7% of the global profit share.


Its participation has increased in the last years thanks to the growth in the civil industry activity and thanks to an increase of the market share for the European giant Airbus, which is now the main competitor for the United States.

Other big competitors:

It is possible to identify other big players –such as Japan, Canada, Brazil or Russia– who, slightly minor contribution, have presented themselves in leader positions in some areas of the industry.

industria aeronáutica

Challenges and trends of the european aeronautic industry

industria aeronáutica

A new competitor:

The entrance of a new competitor that breaks with the duopoly since 1997 between Airbus and Boing. During the last decade, China – which soon will turn to be the biggest aviation market in the world- has been developing its own airplanes through the public enterprise COMAC, searching to penetrate the occidental market.

Supply Chain Consolidation:

Boeing’s supply chain is focused in big suppliers, while the Airbus supply chain encounters itself in a more incipient consolidation phase.

Less dependency on Airbus:

Another challenge that companies of the industry must face is to depend less on Airbus. Because of this, a lot of companies find themselves in the process of complementing their activity by participating in other areas such as the automotive, rail or nautical.

Corporate operations in the aeronautic industry in 2019

¿Which are the main objectives?


Search of leadership

Maintain leadership by increasing the presence in the European market by the creation of big multinationals (TIER l). This trend has become really important, specially in Spain where the level of corporative consolidation is minor than in other countries such as France and Germany.

Take advantageas of I+D of the acquired companies

Less heavy structures and planes with lesser Co2 emissions allows companies to position themselves as important characters in an industry in which technological advances play an important role.

Access to higher volume contract

Access to higher volume contracts. Thanks to major technical and productive capacities, groups that are working in consolidation processes have access to participate in mayor business activities.

Strengthening of financial position

With the entrance of new funds, the company can grow organically in a faster way

Download the full report “The aeronautic industry in 2019”

To find a complete and graphic view of the milestones of this trend and its global impact.

We will keep you informed of the latest news

Autoparts Industry Activity

The Autoparts industry activity is fundamental for economic value in the car making and aftermarket chain. Due to the excess of liquidity in the market, investors seek to increase their international presence. Currently this industry is very attractive, this is thanks to several reasons such as:

  • Increasing average age of the vehicles. In USA and Europe, the average age of vehicles is around 11 years, a trend that has been increasing.
  • Decreasing trend in the passenger car sales for EU and USA. This makes the automotive aftermarket stronger and might be caused by a change in consumer habits.
  • Regulations. Original Equipment Manufacturers (OEMs) cannot prevent their suppliers to distribute their products as spare parts to independent distributors.
  • E-commerce growth. Accessibility and a more widespread use of electronic platforms to make purchases of car parts.

M&A in the Autoparts Industry

During 2018 and 2019 the number of closed deals in the autoparts industry activity has decreased, however, it is expected to upsurge in niches during 2020. The deal count for this industry has behaved the same as the global M&A activity. But as expressed before, because of the already explained drivers, the deal count resistance is expected to shift into a growth pattern.

Even though the global automotive industry is entering a new cycle of decreased activity, we expect a resistance inside the automotive components niches that are engaged in innovative solutions. This includes autonomous driving systems, LED lighting solutions and electrical applications.

Future Prospects

The Autoparts industry activity is always in a continuous transformation process. By 2030, it will be electrified, autonomous, shared, connected and yearly updated.

External Factors

  • 40% of the mileage driven in Europe could be covered by autonomous vehicles in 2030.
  • Mobility habits will change. By 2030, more than one in three kilometres driven could involve sharing concepts.
  • Due to rising population figures and mobility demands, vehicle age will continue to increase. It could rise by 23% by 2030 in Europe, 24% in the US and 183% in China.

Vehicle Inventory

  • By 2030 it is expected that Europe’s vehicle selling inventory will reduce from 280 million to 200 million vehicles.
  • This symbolizes a decrease of over 25%. For the US it would be of 22%, and 50% for China. However, vehicle age should be raising
  • Autonomous driving and electrification will have a mutual impact. By 2030, more than 55% of new cars will be fully electrified.

Redistribution of R&D Investment

  • Companies that invest 25% of their R&D Budget in software applications are rewarded with strong growth.

New Challenges

  • Between 2020 and 2025, manufacturers and suppliers will be battling against sinking margins while at the same time they will have to invest heavily in customer-orientated innovations.
  • New breed of auto components.
autoparts industry

Does your business play an important role in the Autopart Industry?

The autoparts industry activity is expected to grow and change in the following years. If your business is inside this sector it might be the perfect time to consider selling your company. On the other hand, if you are interested in expanding your business, investing on the autopart industry could be the smartest choice. Either way, don’t hesitate to contact one of our specialized advisors to get more information.

Health Industry

Health Industry Outlook 2019

Health Industry Outlook 2019: MARÍA JOSÉ MARTÍNEZ, Author and Partner of ONEtoONE | ANTOINE VAN DEN ABEELE, Collaborator and Partner of ONEtoONE | PHILIPPE JANSSENS DE VAREBEKE,  Life Science Specialist and Collaborator

M&A activity in the Pharma and CRO industries

The health industry outlook in 2019 will face multiple important challenges that may significantly transform the overall business landscape. To name some of them: the entry of new competitors from other industries, for instance, several of Amazon’s purchases of licences of pharmaceutical distribution in some states of the US; the entrance of state-of-the-art technology, such as machine learning, smart devices and autonomous robots; changes to legislation that have occurred in the main geographic regions during the last few years; transformations in consumer trends, such as home care, online attention or even telemedicine; or new methods of patient segmentation, which allow customized treatments according to the patients’ specific needs through the knowledge of their medical history.

However, those challenges have not made a negative impact on the eagerness of investors in the health industry, neither in the M&A activity. As a matter of fact, bigger companies have a better market position owing to technological improvements. As for small and middle-sized companies, they will be forced to incorporate these technologies if they do not want to be left behind.

Pharmaceutical Industry and Contract Research Organisations

On the other hand, the pharmaceutical and health technology industries will not be released of sharp transformations in the following years. The increasingly competitive market, price regulation, expiration of patents, aging of the population, are some of the complex characteristics that define the current situation of these industries. In addition, the need to cope with the rise of globalization, outsourcing, and the complexity of regulation and competition makes it necessary for pharmaceutical companies to have Contract Research Organisations (CROs) as strategic partners.

“Significant mergers & acquisitions have taken place, resulting in the nine major CROs controlling 60% of the market share of clinical trials.

Pharmaceutical laboratories are increasingly delegating competencies to these organisations and it is estimated that the activity of the CROs will continue to grow at an annual rate of 7.4% up to 2020. This growth rate seems to be sustainable and there are indications that this is an increasingly mature market. In fact, significant mergers & acquisitions have taken place, resulting in the nine major CROs controlling 60% of the market share of clinical trials.

M&A activity in the health sector

The number of corporate mergers & acquisitions transactions have remained stable in the entire health industry throughout the years of 2014-2017. Although a large number of transactions were made in the hospital and clinical services sub-sector, the one that received the most investments in 2017 was the pharmaceutical industry, followed by biotechnology and R&D for drugs, medicines, and vaccines.

The main objectives of corporate deals in the health industry have been to achieve or maintain leadership, to increase the presence in each of the health sub-sectors, to take advantage of the R&D capabilities of the acquired companies, and to reduce the costs through the acquisition of HCIT companies. M&A transactions carried out to acquire R&D capabilities in emerging technologies, such as gene therapy and biosimilars have also been common, as well as the acquisition of specialized HCIT software companies to improve efficiency.

However, one of the biggest problems that pharmaceutical companies will face in the future would be the scarce price elasticity of medicines, mostly due to the irruption of new players, such as Amazon, Berkshire Hathaway or JP Morgan Chase. Consequently, pharmaceutical companies are currently focused on the ways of solving out the reduction of total costs of making medicines by:

  • The use of Big Data and advanced analyses, in order to develop medical supplies more efficiently.
  • The change of focus from widely used medicines to specialized treatments, where companies in the industry have more control over prices.
  • The outsourcing of services to CRO so as to develop, manufacture, and commercialize medicines in a more efficient way.
  • Contracting Services to HCIT (Healthcare IT) companies to collect and analyze drug development data more efficiently by using digital tools such as modeling and simulation software.

Regarding Private Equity (PE) Investors, they have continued to be active in the health industry, as their circumstances make it an attractive and growing sector. In particular, investors are notably active in the pharmaceutical segments, care for the elderly, the outsourced CRO services, and the hospital industry.

“The transactions of mergers & acquisitions of CROs in 2017 totaled $13.000 million in value. Besides, the growth of the CRO industry is projected to rise another $20.000 million over the next 5 years.

The challenges faced by the pharmaceutical industry, listed above, explain the large volume of acquisitions in the industry. In detail, the transactions of mergers & acquisitions of CROs in 2017 totaled $13.000 million in value. Besides, the growth of the CRO industry is projected to rise another $20.000 million over the next 5 years.

Future prospects

Despite the aforementioned challenges faced by pharma companies, especially the pressure on drug prices, investors are interested in these industries due to their profit margins and the favorable industry situation. This interest is also influenced by the anti-cyclical nature of the health industry in a macro environment, in which the growth rates start to slow down.

Segments, such as brand pharmacy, generics, CRO outsourced services, and biopharmaceutical ICT will continue to arouse interest due to their advantages. Specifically, Clinical Research Organizations provide access to new markets, enhance the reach of clinical trials on demand, allow access to innovative technology, add therapeutic experience, resize structures, and reduce costs.

Finally, with regard to valuations, they are likely to remain high due to the increasing demand for quality health assets, both from Private Equity and corporate buyers, and it is possible to carry out joint purchases between funds and corporate buyers.

The full report “HEALTH SECTOR OUTLOOK 2019” provides more detailed information about the characteristics of the industry and regional M&A activity. In addition, the document offers an overview of the most noteworthy transactions carried out by the leading companies in the sector. Download it here below: 

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High-Tech Industry Outlook 2019

PAUL RICHARD HAGER (author) | Partner at ONEtoONE Corporate Finance

BERNAR DE LA HERA (co-author) | Partner ICT Specialist, ONEtoONE Corporate Finance

M&A activity in disruptive environment

Technology is advancing at high speed. Remember how space looked from the flight deck of Star Trek’s Enterprise, just before the ship reached warp speed? The speeding onrush of celestial bodies and the blurring of peripheral view might have made you feel the slightest sense of disorientation, anxiety, imbalance. The barrage of new technological innovations disrupting established industries can be equally disorienting, especially if you’re trying to lead a business. This is basically how the high-tech industry can also be described.

Today, innovation in key information technologies is fueling change across thousands of products and services. IT is restructuring business models of thousands of companies, driving a trend for a rising number of smaller individual startups and challenging the survival of more consolidated players in the field. Research shows that an increasing number of companies are buying innovative technologies to ensure a smooth adaptation to new processes, products, services, and markets that are created as a consequence of tech innovation. When outsourcing, for example hiring scarce technical expertise compliant with organic growth strategies becomes obsolete, acquiring other companies for that expertise may become a matter of survival.

Leading technologies like the Internet of Things (IoT), Artificial Intelligence (AI), and Blockchain are enabling innovation across a multitude of industries – especially in finance, transportation, agriculture, energy, supply chain, entertainment, healthcare, and bio-engineering.  These three technologies eliminate barriers between traditional industry verticals. The result is hybrid companies that can efficiently produce, fulfill, scale, and support successful offerings across multiple verticals – a phenomenon called “Amazoning”. New advanced technologies will also continue to fuel related M&A activity.

When outsourcing, for example hiring scarce technical expertise compliant with organic growth strategies becomes obsolete, acquiring other companies for that expertise may become a matter of survival.

Let’s take a closer look at the mentioned technologies

The internet of things (IoT) – Billions of devices – from home thermostats, to heart pacemakers, to farm machinery, to police surveillance systems – are connected to the Internet and constantly communicating data. Businesses are taking advantage of IoT capabilities to scale for competitive advantage, and at a faster pace than they did cloud-based computing and storage.

The IoT ecosystem enables business intelligence (BI) efforts to apply machine learning on raw customer data pulled from devices and networks scattered around the world. Full use of IoT assets allows companies to measure and manage their global supply chains and operational performance instantly. For instance, retailers are able to real-time track individual product purchases – by customers, time of day, location, and dozens of other parameters.

Blockchain – The benefits of Blockchain technology will totally disrupt how we all live and work. Blockchain is a more specialized, function-specific, and structured application of the IoT schema. It is a highly distributed network of processing nodes (e.g., computers, databases, servers), where every node holds a mapping of the entire blockchain structure (addresses, node identifiers). As these nodes, or “ledgers”, complete a transaction for an “owner”, each transaction is time-stamped and encrypted. As these discrete transactions accumulate, they are grouped together, assigned an identifier, and labeled as a “block”. Strong encryption and multiple copies of each transaction block ensure no transaction record can be altered.

Blockchains have no central authority. They distribute work, according to pre-established order of work, across chain nodes for processing. All transactions are verified in the blockchain process and periodically revalidated to ensure there is no variance between nodes’ copies of each specific transaction. Many industries are taking advantage of blockchain’s processing, documentation, transparency, and securitization features.

Artificial Intelligence (AI) – In the 1950s, ‘60s, and ‘70s, AI was primarily an effort to apply sets of statistical models to discern data trends and perform non-complex problem-solving. Early AI was an attempt to replicate basic human reasoning as it applies to data mining and analysis. Today’s AI has advanced beyond data mining and machine learning – to “deep learning” where the computer can identify, recognize, analyze, and describe data patterns in human terms – to apply and enhance its own models and methods in order to more thoroughly understand data’s meaning. Advances in machine and deep learning now fuel other technologies, such as virtual reality, augmented reality, mixed reality, and natural language processing.  In addition, it is very likely that AI will increasingly be used in a wide variety of M&A tasks.

 You may be interested in: Embracing Artificial Intelligence to Enhance M&A

High-Tech industry M&A Activity

Even as new information technologies are created (such as 5G, quantum, and neuromorphic computing), IoT, AI, and Blockchain will remain as major drivers of related M&A activity.  In the attempt to have an overview of the M&A activity in this disruptive environment, we have used in our study a sample of over 5,000 companies and deals from Pitchbook.com advanced search for the high-tech industry for the period 2015-2018. Thus, this research of “disruptive information technology” includes IoT, IA & Machine Learning, Cryptocurrency/Blockchain, Cybersecurity, Fin Tech, Bigdata, Robotics & Drones and Cloud and 3D Printing.

Overall,  the data show that there is a surge in the number of large value M&A deals from 2015-2018. VC firms are targeting larger tech players in the innovative information tech sector. The distribution of capital invested demonstrates that the predominant mid-market industry sector receiving investment was advanced IT, accounting for 70% of transactions throughout the period.

Even as new information technologies are created (such as 5G, quantum, and neuromorphic computing), IoT, AI, and Blockchain will remain as major drivers of related M&A activity.

Which industries receive the most capital investments for innovative IT?

Regarding the industries that receive the largest amount of capital investments for innovative IT, the data reveal a fragmented picture of technology application, with some predominant use groups being software (58.88% of all transactions), Other Financial Services applications (7.61%), Commercial services (5.64%) and IT services (4.02%) respectively.

A more thorough analysis can be found in the full report that can be downloaded at the end of this article. The High-Tech Industry Outlook 2019 includes data of capital invested and deal count according to the volume of transactions, the primary country sector, the deal type, and world region.

To sum up, innovation across the IT industry is accelerating at dizzying speeds. Huge technology disruption – in the form of AI, IoT, and blockchain – is fueling other industries’ in-house innovation, and dramatically expanding companies’ capabilities across global markets. Companies are buying innovative IT to ensure their own ability to deliver new technologies, products, and services at accelerating speeds to quickly-evolving global markets. With regards to today’s M&A landscape, these disruptive technologies had the following impact:

  • US advanced tech M&A remains strong, but Europe IT M&A is growing
  • During a time of falling global Capital Investment activity, rising investment in the IT sector is a bright spot
  • Buyers are placing greater emphasis on integrating acquired IT innovation
  • Advanced IT remains the hot M&A target.

Download the full report “HIGH-TECH INDUSTRY OUTLOOK 2019” to have a deeper understanding of today´s M&A landscape within the disruptive environment. 

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Agriculture Projects and Crowdfunding

Agriculture Projects and Crowdfunding

To meet the challenge of feeding a growing world in the face of strained food production resources, climate volatility and massive urbanization trends, it is necessary to link more capital with agriculture projects. One emerging financing trend that has the ability to significantly broaden the base of the agriculture sector investment pyramid is crowdfunding.

Through crowdfunding it is possible for agriculture project sponsors to directly reach large numbers of individual investors, broadening a project’s capital structure and experimenting with more creative investment terms and conditions.

While crowdfunding has great potential, agriculture companies as well as investors considering this financing option should not lose sight of the basic considerations that apply to other forms of investments, including what the relationship between the company and an investor will be, investment risk and return and the need to match capital investment and repayment cycles with the underlying business realities of a particular project.

The article provides a brief overview of crowdfunding, looks at the use of crowdfunding in the agriculture sector and considers the potential of agriculture sector crowdfunding in the future.

Overview of Crowdfunding

Crowdfunding is a technique for financing business, artistic or other projects and initiatives by pooling often small amounts of capital from a large number of people, in many cases through fundraising platforms that are set up on the Internet.

Crowdfunding can be structured in different ways and imply different obligations and rights for the promoters of projects, the platforms over which fund raising efforts are carried out and investors. The following are some commonly used crowdfunding structures:

Equity. In an equity crowdfunding structure, in exchange for an investment, an investor receives an equity interest in the venture funded. The terms and conditions of the equity investment generally vary on a case-by-case basis.

Debt. In a debt crowdfunding structure, capital from individual investors is pooled and then lent to a borrower. Key terms and conditions of the debt investment are based on the general lending parameters of the platform and the risk profile of the borrower.

Coin. In a coin-based crowdfunding structure, the investor receives a coin or right to receive a coin based on the expectation that a market will be created for the coin in which it can be valued and traded.

Reward. In a reward-based crowdfunding structure, the investor receives some type of reward for his investment. The nature and value of this reward can vary widely.

Donation. In a donation-based crowdfunding structure, donations are made by the investor but the investor does not receive anything in return for his investment.

Crowdfunding has grown in importance as a financing tool. The largest crowdfunding platforms, such as Kickstarter and Indiegogo, have collectively raised billions of dollars in equity financing. It has been estimated that, as early as 2020, the crowdfunding market as a whole could reach US $90 billion.

As the crowdfunding market has grown and demonstrated its viability as a financing option, more and more types of businesses have sought crowdfunding options, including fashion, insurance and real estate.


Crowdfunding and Agriculture Projects

There are now several crowdfunding platforms in the market with an agriculture sector focus. Examples of these platforms include AgFunder, Cropital, the agriculture funding platform of Symbid and Harvest Returns.

Going forward, crowdfunding has the potential to play an important role in the agriculture sector for several reasons. The first reason is that agriculture projects can require a large amount of capital that can exceed the investment thresholds of smaller investors. Crowdfunding can give smaller investors the opportunity to participate in promising agriculture ventures of different sizes and in different parts of the world.

The second reason is that crowdfunded capital has the ability to fill the often large space between debt financing and equity investment. This space exists because the time it takes to arrange equity financing often significantly exceeds what food production cycles require, risk and return mismatches and disconnects that often occur between food production and profitability cycles and investor capital deployment and capital return timing expectations.

Limited access to equity capital, and particularly equity capital at the higher end of the risk spectrum, poses a major challenge to small and medium-sized agriculture companies who need higher risk capital so that they can create cultures of innovation and take healthy risks which can allow them to offer new agriculture solutions, create production efficiencies and significantly build firm value.

A third reason is that many consumers are increasingly concerned about where their food comes from, how it was grown and the food’s quality. Crowdfunding provides opportunities for individual investors and consumers to become more directly involved in earlier stages of the food production cycle. Further, the fact that by definition all food sector investors are also food consumers creates the possibility of paying investment returns not only through capital but also through food products that the farm has produced. This can help to convert producers and consumers from people who are on opposite sides of the food chain to partners.


Issues to Consider in Agriculture Projects

While crowdfunding poses great promise for the agriculture sector as a whole, agriculture companies that are considering crowdfunding as a financing option should keep in mind that, rather that constituting a silver bullet financing solution, crowdfunding for many firms will best be used as a complement to traditional debt and equity financing sources.

Further, while some types of crowdfunding do not require investment funds to be paid back, basic laws of investing economics suggest that no funding source will last for long if it is not based on a reasonably fair exchange of economic value. Accordingly companies should carefully structure capital raises so that they will lead to successful business ventures that ideally create a stage for long-term and mutually beneficial company-investor relationships.

From the investor’s perspective, the ability to invest directly in companies whose investment offerings have not been thoroughly vetted creates real investment risk. Agriculture is a sector with real risks and some companies, due to their teams, business models and commercial arrangements may be significantly better placed to manage these risks than others. Accordingly, investors must be on their guard to thoroughly analyze investment opportunities, and if necessary seek the assistance of third parties in doing so, so that investors clearly understand potential risks and returns.


Crowdfunding is set to become an increasingly important element of agriculture sector finance. This type of funding option has the potential to expand agriculture capital markets, allow agricultural firms to build value more efficiently and involve people more directly in food production.  At the same time, companies as well as investors need to analyze crowdfunding options carefully to make sure they make economic sense, are carefully structured and ideally lead to mutually beneficial investment relationships.

This article was written by Darin Bifani.

Valuing Companies in Emerging Markets

Valuing Companies in Emerging Markets

In our financially interconnected world where there are few restrictions on where M&A deals can be carried out, one major practical transaction challenge that investors and companies face is the valuation of companies and assets in emerging markets.

Emerging market valuation can be difficult due to several reasons, including:

– the key revenue and cost drivers of a company’s business may be highly exposed to microeconomic or macroeconomic variables that are rapidly changing

– there may be a limited number of transactions in a market involving a particular asset or company type which creates a high degree of uncertainty about what an asset or company is worth

– there may be country risks, such as political or social risks, which create significant uncertainty about how the business environment a company operates in will change in the future.

These difficulties often lead to situations where companies or assets are significantly overvalued or undervalued, creating unrealistic investment return expectations, investor and company tensions that negatively affect a company’s performance and, most importantly, inefficient patterns of capital allocation and repayment that can restrict business and economic growth.

This article briefly defines the concept of an emerging market in the valuation context, discusses some emerging market valuation challenges and sets forth guidelines that companies and investors can use when they face valuation challenges in these markets.

What is an Emerging Market?

While the term “emerging market” is often used as a shorthand way to refer to countries that are entering a phase of significant economic growth, from a financial valuation perspective the concept of an emerging market is often not so straightforward.

The reason for this is that every country is in reality comprised of many different markets, and these markets are in a constant state of flux with some markets growing, others in a state of relative stability and other markets in a phase of decline. Even with respect to markets that are in a phase of decline in terms of total market size or profit margins, the application of new technologies may cause these markets or sub-markets to enter new periods of high growth.

For the purpose of valuation, it is therefore helpful to identify three types of emerging markets:

– the first type of emerging market is a country that is undergoing a phase of rapid economic growth. This is growth which is significantly better than historical growth rates and has been sustained for at least several years. To provide one example of a classic emerging market, since 2002, Ethiopia’s annual GDP growth rate has exceeded 10% many times

– the second type of emerging market is a sub-market in an economically mature market, such as the United States, that is currently undergoing a phase of rapid economic growth. An example of this type of market is green vehicle technology

– the third type of emerging market is a market which is the result of the combination of two markets, such as the financial sector and technology, producing the fintech market.

These emerging market types highlight the point that regardless of how a market is labelled, the actual market realities a company operates in can be highly dynamic and complicated.

Valuation Challenges in Emerging Markets

Valuing assets and companies in emerging markets presents significant challenges, both from market-based as well as cash flow-based valuation approaches.

Market-Driven Valuation Approaches

A common way for companies to be valued is to derive valuation metrics from the market, such as based on the relationship between company sale prices and company revenues or EBITDA. However, in emerging markets there can be very little transaction history regarding a company or asset type, so these metrics may not exist

Cash Flow-Based Valuation Approaches

Another common way for companies to be valued is to forecast the company’s future cash flows and then discount the value of those cash flows by a discount factor based on risk. In emerging markets, however, this can be very challenging to do because first, as suggested above, there may be not enough transaction history to extract a discount factor. More importantly, emerging markets often experience high degrees of volatility and accordingly cash flows and risk levels can be highly susceptible to change, either moving to more stability, lower risk and lower growth rates or becoming significantly riskier and at times even collapsing.

Emerging Markets Valuation Principles

To face the challenges of emerging market valuation, it is helpful to keep the following points in mind:

Definition of Market. The first point is to accurately define the market that the relevant company or asset is in. It is often the case that a company in an ostensibly highly stable market is actually positioned in a sub-market experiencing significant growth which may be not be reflected in the valuation metrics applicable to transactions in the broader market. Similarly, a company in a highly volatile emerging market may actually have a business model which is highly stable and insulated from a significant amount of market volatility, such as a company in an emerging market whose sales are based on long-term contracts with highly stable buyers.

Definition of Company Relationship to Market Drivers. The second point is to analyze the relationship of a company’s business model to market drivers. For some business models, such as construction, there tends to be a high correlation between the company’s business model and a country’s GDP growth. Other business models, however, may benefit during periods of macroeconomic volatility, such as those based on debt renegotiation or selling discount products and services.

Use of Other Markets as Valuation Reference Points. In the absence of sufficient transaction history in a market for valuation purposes, it is useful to use metrics in other markets as a starting point. While different markets can have very different realities, many business models of companies in the same industry, even if they are located in different jurisdictions, are structurally similar which can help define income and cost structures and profitability.

Once this is done, it is then necessary to compare the company to be valued with companies in the reference market to see whether the reference valuation parameters should be adjusted upwards or downwards. Some key factors to consider in this comparative analysis are:

– The profitability of the company to be valued compared with companies in the valuation reference group;

– Risks to the company’s current revenue and cost structure compared with risks that affect the company’s valuation reference group;

– Size of a company’s potential growth market compared with companies in the valuation reference group; and

– Ability of a company to take advantage of that growth market compared with companies in the valuation reference group, based on such factors as strength of the companies’ leadership and management teams, the nature of competitors in the market, barriers to market entry and regulatory factors that promote or restrict competition.


Due to the integration of global capital markets and low economic growth rates in mature markets, investors will continue to look for investment opportunities in emerging markets and companies in emerging markets will continue to search more developed markets for investment capital.

While investing across markets at different stages of development presents significant valuation challenges, through a careful analysis of market realities and comparing the structure and prospects of a company’s business model to companies in a reasonably selected valuation reference group, it is possible to obtain a valuation of a company or asset in an emerging market that is fair for investors as well as target companies. This is necessary to match investment capital with investment opportunities and create continually more efficient markets.

This article was written by Darin Bifani.

Airline Industry Consolidation, It’s Here to Stay

Airline Industry Consolidation

Since the Airline Deregulation Act of 1978, the aviation industry has unquestionably remained one of the most ultra-competitive sectors within the world of business, hence the airline industry consolidation. Come 2018, and the unrelenting struggle over squeezing margins, ever-expanding passenger numbers and volatile fuel prices has seen the recent departure from the sector of the likes of Monarch Airlines, Air Berlin and soon-to-be Alitalia.

In a bid to keep their planes in the sky, airlines have resultantly looked to convergence-type strategies such as mergers, airline groups and joint-ventures so to remain well-connected, competitive and relevant in an industry that is often dominated by the heavily subsidized, government-backed carriers such as the infamous Gulf State three: Emirates, Qatar Airways and Etihad. In turn, the apparent need to form these various partnerships has the capacity to create the most unlikely instances of collaboration; all in the name of getting that extra bum-on-seat.

OneworldAmerican AirlinesIAG
SkyTeamDelta AirlinesAir France-KLM
Star AllianceUnited AirlinesLufthansa Group

Table 1. Outlining the current formation of major Airline Groups, and their corresponding Alliances within the US & Europe

Everyone is Wanting a Slice of the Pie

It is as truly symbolic as it is reflective of the industry’s cutthroat nature, that a French and Dutch airline would choose to join forces, or for an industry leader such as Qatar Airways to still seek out codeshare agreements with the likes of British Airways and Iberia, as a part of their 20% stake in IAG. Even more recent, one of the most quintessential rivalries has been eased, with Qantas and Air New Zealand (who originate from different alliances) announcing a new codeshare agreement that covers their respective domestic networks.

Amongst the benefits of heightened connectivity and market share, consolidation within the aviation industry has the propensity to generate significant innovations amongst airlines, which will ultimately seek to combine their resources. For example, an airline group that connects each member’s respective digital presence and AI mechanisms, has the enhanced ability to create a business that genuinely understands the wants and demands of its customers. With this improved access to information, an airline group can more accurately implement strategic changes, recognizing whether there is more value in developing a new low-cost carrier (LCC), or investing further in the quality of their full-service airline etc.

So, What Can We Expect to See in the Airline Industry?

At present, the industry continues to churn out more and more agreements, with Fiji Airways having just been confirmed as a Oneworld “connect” partner, which will in turn link the Pacific Island nation to the alliance’s extensive network. Closer to home, the notorious LCC, Ryanair, have publicly stated their interest in developing an airline group of their own, touted as Ryanair Holdings. Such an entity could have fascinating implications for the industry, with the prospective project having the potential to become the sector’s first ever LCC-specific airline group. All the while, IAG has also made public their desire to acquire another up-and-coming LCC in Norwegian Airlines. Finally, Lufthansa Group are also considering the potential acquisition of the bankrupt Alitalia, whilst also having been linked to the Sweden-based Scandinavian Airlines (SAS).

A logical question to ask at this point is what does all of this consolidation tangibly mean for the average customer? Arguably the biggest thing for a passenger to understand will be the heightened value of loyalty to an airline alliance. With more airlines continuing to bolt on to one of Oneworld, SkyTeam or Star Alliance, it might simply be a matter of choosing an airline and its corresponding alliance and sticking with it. The exhaustive membership list of these alliances mean that no destination will be unreachable, regardless of which partnership you are associated with. In turn, by sticking loyal to one alliance you will ensure that you gain access to discounts, seamless connections when travelling internationally, and the increased likelihood of that ever-elusive upgrade.

As such, both airlines and passengers can, and are, finding safety in numbers by way of benefitting from the implications of the industry’s ongoing consolidation.

The Coming Agriculture Sector Investment Landscape

Due to the challenges of feeding a rapidly growing world with shrinking arable land and water sources, the agriculture and financial sectors will need to work hand in hand to create new, sustainable food solutions. The drive to meet food supply needs will have a large impact on agriculture sector capital requirements and investment.

We believe the following developments will significantly affect the agriculture sector investment landscape in the coming years. 

Mid-Market Cross-Border Agriculture Sector Investment Activity will Sharply Rise

A large amount of food in the world is produced by small and mid-sized farmers.  These farmers often face many operating difficulties, including inefficient farming practices, lack of capital and limited or no access to markets that can pay the best prices for they food that they produce.

Cross-border investment will allow smaller and mid-sized agricultural businesses to supplement traditional debt finance with more flexible equity capital that will permit them to better withstand financial and production downturns and more quickly reach their agriculture production potential.  This will provide the financial sector with essentially a new class of investment opportunities.

The Agriculture Sector Investment Vertical Will Become More Stratified

The agriculture sector currently represents a collision of large agriculture sector and financial sector factors.  On the agriculture side, the traditional up-stream, mid-stream and down-stream components of the agriculture value chain are being rapidly broken into smaller parts to create production, processing and transportation innovations, efficiencies and risk diversification.

On the financing side, traditional commercial bank debt financing is being rapidly supplemented by capital from new classes of investors who are relatively new to the agriculture sector, such as family offices, private equity funds and pension funds, and who have different investment horizons, objectives and risk thresholds. These investors are bringing not only additional funds but also non-agricultural short and long-term value creation investment strategies to the sector.  This will provide new financial flexibility as well as discipline.

The result of this collision will be that investment strategies and products will become increasingly calibrated with agriculture sector value chain stratification, more efficiently matching capital with vertical-specific needed agriculture sector finance.  This will lead to a broad range of investments that will accelerate agriculture sector value chain stratification further, from development of new types of food, to new processing robotics to the efficient delivery of food to consumers.

Tech/Land/Sales Tie-Ups Will Become More Common

The global agriculture value chain suffers from large input, throughput and output inefficiencies which cause a great loss of potential sector value.  Examples of this are:

–  Often developing countries with large agriculture land holdings lack technology and sales channels to maximize production potential;

–  Companies with developed agriculture technology lack land or sales channels to maximize technological potential; and

– Sellers who have strong sales channels lack appropriate or sufficient product to maximize sales potential.

Because of increasing market transparency, it has become easier to identify and eliminate these  inefficiencies, which should lead to new joint venture models which harness horizontal and vertical synergies. The realization of these synergies will create real financial gains that can be either passed through to consumers or recycled back down the agriculture value chain in the form of new investments.

The Agriculture Sector Value Chain Will Increasingly Resemble a Circle Rather Than a Line

While the global international trade network has allowed the agriculture sector value chain to be significantly extended, there is often a significant gap between production strategy and actual food consumption, resulting in significant agriculture production missteps and financial inefficiency.

Going forward the distance between the production and consumption ends of the agriculture sector value chain will increasingly form a circle rather than a highly elongated line, allowing producers to better understand consumer preferences and allowing consumers to better understand more about the food that they consume.  This reformation of the agriculture sector value chain will create many investment opportunities, particularly in processes and entities that can shorten production and consumption gaps.

Combined Energy/Agriculture Projects Will Become More Common

The combination of renewable energy and agriculture is still in its infancy and there are many ways that renewable energy can be used to maximize the value of rather than replace agricultural land, such as through mini-renewable power and bio-mass projects that power specific agriculture activities or provide energy for whole farming operations.

For some agricultural projects, complimentary solar or hydro projects may be used to generate independent revenue streams which can provide additional property financial strength and smooth out production-related revenue volatility.  This will not only open up agriculture projects to a wider investor base but will also increase confidence in yields which should attract further institutional investment capital.

Land Value Monetization Strategies Will Become More Widely Used

A significant obstacle to obtaining equity financing in the agriculture sector, particularly in the mid-market segment, is often that land values are very high but cash flows are low, resulting in the common M&A deal dynamic where investors want to value an agriculture business based on a multiple of cash flows but farmers do not want to sell their businesses at a fraction of what the fixed assets are worth.

There are several ways to overcome this impasse, but one way is to replace traditional buy-sell deal approaches with more flexible transaction structures which better share property operating risk and rewards going forward.  One example of this is the sale-leaseback where a farmer sells land to an investor and subsequently operates the land and makes guaranteed lease payments.  This allows cash-constrained farmers to monetize land values, remain incentivized to manage the property well over a long period of time and gives investors a long term attractive yield.

Agriculture Capital Markets Will Become More Diversified

Many agriculture companies, particularly in the mid-market segment, are not publicly listed, which limits their access to capital. However, individual consumers have increasingly shown an interest in a greater connection with the food that they buy, and this will likely naturally lead to small lot investments in agriculture projects.  Building capital markets products from a food consumption demand rather than a strictly financial perspective would also create wider agriculture market capital channels.

Article written by Darin Bifani, Partner of ONEtoONE Corporate Finance.